Just a question for you. . . but wouldn't out government see greater revenues devoting its resources to going over schemes like this rather than auditing people making less than $100,000? It seems to me the payoff is much bigger and yet, we don't EVER hear about these people getting busted by the IRS.

But how many people do you have to audit to get $10 million? It seems very inefficient to go after people where the fines might be $10,000 or even $20,000 when this one company was doing shit that would have brought in millions.

It would seem to me that the return on investment for small payers -- the average wage earner is so miniscule that it doesn't make sense. Surely they have an audit budget. If it costs them $10,000 to put on an audit, it seems to me that going after the bigger fish would make more sense.

Most audits of people making under 100k involve almost no variable costs. The IRS has a computer system that spits out discrepancies and either sends the taxpayer a bill or a request for more information. A lot of the time the taxpayer knows the missed something or is just intimidated so they just pay what the notice says. Almost no human contact required and therefore little additional cost.

Don't get me wrong, they go for the big guys too. But the idea of comparing an under 100k audit and a multi million audit is insane. They are completely different beasts.

This happened to me before. Got a bill from IRS, was intimated. I went and poured through all my tax documents and noticed I forgot to claim a deduction. Sent back the amended tax return with the new deduction that more than offset the original IRS bill. Got a check from IRS 2 weeks later :D

There are millions of people at that tax bracket, relatively few schemes which are exponentially harder to catch.

If you were an IRS auditor wouldn't you rather take a million dollars in dirty money than your regular 5 figure take home from your job. Someone making 100k getting audited can't bribe their accountants/auditors as easily.

Well I'm no expert, certainly no tax man, but on a small scale there are many businesses who are required to hire private accounting firms to perform their regular auditing. These people often become friends as they work in the office quarterly or even annually, lunches are paid for, vacations are supplemented, etc.

An actual tax audit would be significantly more difficult but these things are generally less obvious than it would seem. If you have a good bookkeeper they're pretty much impossible to find, if an auditor were to pull certain files it would be possible to encourage them to use different files for their sample.

In more corrupt countries it is probably possible to simply buy a clean audit.

Usually a small problem or casual friendship quickly accelerates into the large problem we read about. In the case of these large banks hiding money. (I'm not going to find evidence) one bank surely found a loop hole and was happy paying a few % less in taxes than all their large competitors. Not being beaten, they discovered this 'technology', matched it, and improved on it. A small problem or relationship tends to accelerate out of control without fault on one individual or corporation. The blame rests solely on congress and the incentives laid out by them.

The government pays for simple algorithms to pick up likely liars/cheaters on tax documents. They send a simple letter asking for more info and pay entry level workers/interns to process or confirm the findings. About $50-500 worth of work goes to collecting 100's to 1000's of dollars with little chance of dispute or appeal. It is very low hanging fruit with 60M records to pick low fruit from.